Land Gains Tax – Vermont

The state of Vermont uses a Land Gains Tax to protect rural land from short-term speculation. First effective in 1973, the tax imposes very high taxes on sales of land held a short time and sold for a large profit.

The land gains tax is imposed on the gain from the sale or exchange of Vermont land that was held less than six years, and the land is not part of the first ten acres beneath or contiguous to the seller’s principal residence.

The tax is determined at a flat rate based on the percentage of gain to basis. The tax goes from a high of 80% for gains over 200% on land held less than 4 months to a low of 5% for gains of less than 100% on land held between 5 and 6 years. Property held longer than 6 years is not subject to the tax. The tax targets owners whose intent in buying up resource lands was to profit from their conversion to urban use, It allows local jurisdictions to capture a large part of such windfall profits.

Landpurchased to build a principal residence may be exempt if certain conditions are met. “Land” includes timber rights that are purchased and sold within six years provided that the underlying land is also sold within six years.